Theravance Biopharma Inc (TBPH) 2021 Q3 法說會逐字稿

Ladies and gentlemen, good afternoon.

I'd like to welcome everyone to the Theravance Biopharma Third Quarter 2021 Conference Call.

(Operator Instructions) Also, today's conference call is being recorded.

And now I would like to turn the call over to Gail Cohen, Vice President, Corporate Communications.

Please go ahead.

Good afternoon, and thank you for joining the Theravance Biopharma Third Quarter 2021 Conference Call to discuss our business.

As always, I remind you that this call will contain forward-looking statements that involve risks and uncertainties, including statements about our development pipeline, expected benefits of our products, anticipated timing of clinical trials, regulatory filings and expected financial results.

Information concerning factors that could cause results to differ materially from our forward-looking statements is described further in our filings with the SEC.

Now I would direct your attention to Slide 3. Joining us are Rick Winningham, Chief Executive Officer; followed by Rhonda Farnum, Senior Vice President, Commercial and Medical Affairs; Rick Graham, Senior Vice President, Research and Development; and Andrew Hindman, Chief Financial Officer.

Now I will hand the call to Rick Winningham for opening remarks.

Thanks, Gail.

In mid-September we announced the decision to restructure the company in order to optimize our business model.

This decision followed a complete scenario planning exercise led by the Board management with the assistance of outside advisers.

Since the announcement, we've made a rapid transition to a streamlined respiratory-focused Theravance Biopharma.

We immediately initiated a significant cost reduction program.

We've taken action to reduce the company's headcount by approximately 75%, estimated 270 positions, and we're on track to complete a large majority of these reductions by the end of this month, with the remainder to be completed in February of 2022.

We're focused on leveraging the expertise in developing and commercializing respiratory therapeutics and streamlined our future R&D investments to focus solely on the highest value respiratory assets.

We will continue to explore strategic partnerships for both core and noncore assets to unlock value.

All of these actions drive towards our goal to maximize shareholder value.

Moving to Slide 5. There are 3 key pillars of value creation for the go-forward plan, to build on our track record of respiratory innovation leading to several approved medicines for COPD and asthma.

This includes TRELEGY, a respiratory medicine developed by Glaxo Group in collaboration with the company's predecessor, Theravance Inc.

and YUPELRI, which was discovered and developed by Theravance Biopharma launched in 2019 and has now commercialized in the U.S. in partnership with Viatris.

TRELEGY is experiencing exceptional growth with its dual indication for COPD and asthma, driving higher demand in the U.S. and GSK's obtained approval for the asthma indication in 10 additional markets.

TRELEGY is currently expected to generate global peak sales of approximately $3 billion annually.

YUPELRI remains early in its product life cycle, has demonstrated market share growth quarter-over-quarter despite the respiratory pandemic, and we believe it's got the potential to generate U.S. peak sales exceeding $400 million.

We believe the strong and growing cash flows of TRELEGY and YUPELRI and the expected future robust revenue performance for both will generate significant value creation opportunities for our shareholders.

It's my pleasure to have Rhonda Farnum, now SVP, Commercial and Medical Affairs, join us on the call today.

Rhonda has been a part of the Theravance leadership team since joining the company in July 2018 as Vice President, Sales and Marketing, where she was responsible for the commercial execution of our branded products, including sales, marketing and managed markets.

Her deep commercial expertise and success had steered the team well.

In her new role, with expanded responsibility, including medical affairs, I'm confident our progress will accelerate.

Rhonda will provide an update on the strong and growing cash flows from YUPELRI and speak to the overall COPD market dynamic.

COVID-19 continues to impact COPD patient visits, diagnoses and new starts.

Despite this dynamic, both YUPELRI and TRELEGY, thanks to GSK's efforts, continue to grow market share and provide significant value to shareholders.

Rick Graham will update you on where we are with the highest value core respiratory programs in the rest of the pipeline.

Moving to Slide 6. As we stated in the announcement regarding our strategic actions, significant operating expense reductions to drive sustainable cash flow generation beginning in the second half of 2022 are critical, and we provided preliminary 2022 financial guidance.

Andrew Hindman will follow with the highlights of GSK's TRELEGY performance and an overview of our third quarter financials.

I'll now turn the call over to Rhonda, who will share our commercial team's progress with YUPELRI and speak to the COPD marketplace dynamics.

Rhonda?

Thanks, Rick.

I appreciate the opportunity to participate and provide this quarter's update.

Turning to Slide 8. YUPELRI is the first and only once daily nebulized, long-acting muscarinic antagonist that provides a full 24 hours of control for patients and is indicated for the maintenance treatment of patients with COPD.

Despite the continued headwinds created as a result of the global pandemic, we are encouraged by the growth of YUPELRI total prescriptions from Q2 to Q3 as well as the addition of new hospital accounts that are ordering each week.

As a reminder, Theravance Biopharma and Viatris co-promote in the United States with our combined sales infrastructure, targeting health care professionals who treat COPD patients suitable for YUPELRI.

Theravance Biopharma commercial and medical field teams cover the hospital segment of health care providers and Viatris covers community health care professionals.

Also remember the Viatris Theravance Biopharma commercial partnership is a 65-35 profit share split.

Slide 9 shows Theravance Biopharma's implied 35% share of net sales for YUPELRI during the third quarter 2021 of $13.8 million.

YUPELRI year-over-year net sales are up by 7% for Q3 2021 versus Q3 2020.

The brand also continues to show quarter-over-quarter market share growth.

Demand doses increased 1% in the third quarter over second quarter 2021 and 21% year-over-year.

While institutions in some parts of the country are allowing more in-person access, in-person engagements remain below prepandemic levels.

Total prescription volumes continue to grow across most specialties, with volumes heading towards parity with 2020.

However, prescription volumes within the pulmonology specialty remain below pre pandemic levels.

Turning to Slide 10.

You can see that YUPELRI share continues to grow both in the hospital, in the community retail settings.

As we have noted previously, many patients with COPD experience an acute respiratory episode serious enough to require a trip to the hospital.

The hospital becomes a key point to assess a person with COPD and convert or switch them from their current medication to YUPELRI.

Data shows that many patients who receive YUPELRI in the hospital are discharged with a prescription to continue treatment, allowing for continuity of YUPELRI therapy post discharge.

The Viatris and Theravance Biopharma teams continue to work effectively and collaboratively, using multiple tools and tactics in coordination to convert appropriate patients from competitive products to YUPELRI during the hospital to outpatient transition experience.

Over the course of Q3 2021, approximately 33% of all COPD-targeted hospitals were physically accessible to our field colleagues, which was an actual decline from 62% the previous quarter.

Despite the evolving institutional and outpatient clinic access, we have been encouraged with the growth in total prescriptions from Q2 to Q3.

The new-to-brand prescriptions have remained stable over the same time period.

In addition, new hospital purchasing accounts are being added weekly.

Looking specifically at the Theravance field sales deployment efforts in Q3 of 2021.

Doses sold exclusively in the hospital setting represented an 11.7% increase from the previous quarter.

September YUPELRI Hospital volume hit a new launch-to-date high, and we saw a 43.5% year-over-year growth from September in 2020.

Looking ahead, it is important to understand that according to the gold guidelines, the LAMA or long-acting muscarinic antagonist is foundational to COPD maintenance care.

The execution of our tactical plan will continue to leverage these guidelines in appropriate patient types, while we continue to optimize the marketing mix through rigorous and continued measurement of tactics.

We will be initiating a Phase IV PIFR clinical study, which is aimed at helping to better inform decisions when physicians are designing a personalized COPD treatment plan with patients.

This study will compare improvements in lung function in adults with severe to very severe COPD and suboptimal inspiratory flow rates following once-daily treatment with either YUPELRI delivered via a standard jet nebulizer or tiotropium delivered via a dry powder inhaler.

Findings from this study are intended to provide data to support a possible label update and help to better inform physicians as they are working with their patients to design COPD maintenance treatment plans.

And we expect the study to initiate later this year or early January 2022.

Moving to Slide 11.

Let's take a more macro look at the overall COPD retail market.

If you take a rolling view over the past 12 months of both nebulizers and handhelds, again in the face of a respiratory pandemic, YUPELRI and GSK's TRELEGY demonstrate resilience to many of the external factors.

As a reminder, TRELEGY owned and marketed by GSK is the first and only once-daily single inhaler triple combination therapy approved for the treatment of COPD and asthma.

I'm not specifically highlighting BREZTRI's growth because of its recent launch timing, but let's take a closer look and move to Slide 12.

As a result of BREZTRI's entrance to the market and the addition of the asthma indication for TRELEGY in September of 2020, the overall closed triple market has grown as expected and is also demonstrated on Slide 13.

GSK mentioned during their Q3 earnings last week that the dual indication is driving higher demand in the U.S. The slide also reconfirms the challenges pulmonologists experienced in the third quarter and throughout the pandemic when treating COPD patients, which includes a decrease in in-person patient visit volume and a limited ability for health care professionals to diagnose and reassess their patients without pulmonary function test or spirometry, which cannot be performed via telemedicine visits.

Both factors contributing to a reduction in prescriber confidence and fewer prescriptions.

The pandemic also had led to increased insurance changes, which include Medicare patients migrating from fee-for-service Medicare to Medicare Advantage plans, which could result in higher patient copays and create -- and greater concerns of affordability associated with prescription fulfillment.

We expect, as more people are vaccinated, boosters are given and pulmonologists' ability to return to seeing more patients face-to-face in their offices grows, there will be a rise in sales for TRELEGY and YUPELRI in the coming quarter and 2022.

I'll now turn the call over to Rick Graham.

Thanks, Rhonda.

The go-forward organization is focused on the highest value core respiratory opportunities, as outlined on Slide 14.

These include YUPELRI realized cycle management, including a clinical study in partnership with Viatris.

As Rhonda mentioned, success in the PIFR study would capture more of YUPELRI's addressable market and further strengthen its competitive advantage.

We'll be responsible for 35% of the cost of the study, which is planned to initiate in December '21 or January of 2022.

Nezulcitinib is our most advanced clinical candidate, and we're finalizing the development program in acute lung injury, building on the efficacy and safety data, including the mortality benefits seen in the Phase II study, which was reported in June.

We're also looking to participate in externally funded platform studies, evaluating its potential role in treating hospitalized patients with severe lung inflammation.

These studies could initiate in early 2022.

We continue to see nezulcitinib having potential application in chronic lung inflammation, including the prevention of lung transplant rejection and fibrotic diseases of the lung.

Finally, our concentrated research effort aimed at developing a dry powder inhaled form of our inhaled pan-JAK inhibitor continues internally, and we expect to proceed into the clinic with the next-generation compound after securing a strategic partnership.

Moving to Slide 15.

Our pipeline slide has been updated to reflect our respiratory focus and recent study results and decisions.

Regarding the late-stage noncore assets, the key operational activities for all Izencitinib and Ampreloxetine studies will be completed by the end of the first quarter in 2022.

The Phase II study in Crohn's disease with Izencitinib has completed enrollment with top line results expected in the first quarter of '22.

Top line results from the Ampreloxetine Phase III study, REDWOOD, are also expected in the first quarter of 2022.

And as a reminder, all patients in the REDWOOD study receive Ampreloxetine treatment for 16 weeks, followed by a 6-week randomized withdrawal period.

We plan to share top line results and present the data from these programs at future scientific forums.

I'll now turn the call over to Andrew to review the financials.

Thanks, Rick.

Let's first look at TRELEGY.

As Rhonda mentioned, TRELEGY owned and marketed by GSK is the first and only once-daily single inhaler triple combination therapy approved for the treatment of COPD and asthma.

Theravance Biopharma is entitled to receive upward-tiering royalties on global net sales of TRELEGY.

At present, 75% of the income from our economic interest is pledged to service principal and interest payments on our outstanding 2035 nonrecourse notes, and the remaining 25% of income is retained by us.

On Slide 17 we capture the most recent information GSK shared during their earnings call on October 27.

They noted that TRELEGY continued to lead the market as a single inhaler triple therapy, with Q3 2021 sales growth of 77% over Q3 2020, generating global net sales of $449 million.

And year-to-date in 2021, Theravance Biopharma has received $59.4 million from TRC LLC for our economic interest in TRELEGY.

Moving to Theravance Biopharma's consolidated financials on Slide 18, we provide our third quarter 2021 financial highlights compared to the third quarter 2020.

R&D expenses for the third quarter of 2021 were $43.7 million compared to $67.4 million in the third quarter of 2020.

SG&A expenses for the third quarter were $21.3 million compared to $27.5 million in the third quarter of 2020.

As a reminder, all of these figures exclude share-based compensation.

And we ended the quarter with $216.2 million of cash and cash equivalents.

Regarding financial guidance for the full year 2021, we are reiterating our previously issued guidance.

For R&D, we expect to invest between $180 million to $190 million relative to actual R&D investment of $230 million in 2020.

For SG&A, we provided a range of $70 million to $80 million relative to actual SG&A expense of $77 million in 2020.

Again, all of these figures exclude share-based compensation.

And during our announcement in September, we provided preliminary 2022 financial guidance.

For R&D, we guided to investing between $55 million to $65 million.

And for SG&A, we provided a range of $30 million to $40 million.

We plan to update the 2022 financial guidance in January 2022.

And with that, I'll turn the call back to Rick Winningham for closing remarks.

Thanks, Andrew.

On Slide 19 we summarize how we're creating a new respiratory focused Theravance Biopharma.

First, it's about significant cost reduction to become sustainably cash flow positive beginning in the second half of 2022.

We've already taken steps to significantly cut costs with a large majority of the approximately 75% reduction in force, exiting by the end of this month and the remainder by the end of February 2022.

Second, it's about value creation.

As we reviewed we have 3 significant levers growing YUPELRI commercial performance.

The Theravance biopharma and Viatris teams have done a great job serving a COPD community and gaining market share during the pandemic.

We recognize the U.S. and global opportunity to increase profit on a brand basis once the pandemic further eases and pulmonologists return to seeing COPD patients at the office.

Realizing the potential of nezulcitinib, the first inhaled JAK inhibitor targeted directly to the lung.

This investigational compound has the potential in multiple indications for hyper inflammation of the lung over time and strategically designed clinical program to maximize return on investment.

We'll build on our respiratory expertise in design and go forward plan.

And the third lever of value creation we control is leveraging partnerships to unlock the value of core and noncore assets.

Another key pillar of value creation is our economic interest in TRELEGY.

GSK reported year-over-year sales growth of 77% this quarter for the same period in 2020, and estimated peak sales are approximately $3 billion.

The new respiratory-focused Theravance Biopharma is striving towards our goal to become sustainably cash flow positive beginning in the second half of 2022 and to maximize shareholder value.

In closing, I'd like to thank our internal team for their perseverance through their tenure at the company, especially the last few months that have tested each of them personally and professionally.

I'm grateful for their commitment to our mission of continuing to develop medicines that make a difference and the progress of our clinical pipeline, YUPELRI, as well as the communities we serve.

I also want to thank once again the investigator sites' patients and their families across the globe who have been a part of our clinical trial programs.

November is national COPD awareness month and with early diagnosis and treatment, people with COPD can improve their quality of life and breathe better.

I thank all the advocacy groups for their educational efforts.

I'm hopeful that we can contain the pandemic and pulmonologists can start seeing patients with greater frequency, face-to-face once again.

I'll now hand the call back to the operator for questions.

(Operator Instructions) We have our first question from Geoffrey Porges with SVB Leerink.

Rick, first, on the goal of sustainably breakeven, is that an aspiration?

Or is it your guidance that given the trajectories that you see and the plan that you've laid out that you will be sustainably breakeven in the second half.

And then secondly, could you give us some sense of the expenses that are associated with your current revenue from YUPELRI?

So to Theravance today is YUPELRI operationally breakeven or what is the threshold for becoming breakeven?

And then lastly, as you considered all these strategic alternatives, do you see the company as having any assets that you could sell to generate value that you could reinvest in terms of pipeline or other to compliment R&D opportunities.

Thanks, Jeff.

Our plan that we outlined, in fact, is a plan that today were planned to be sustainably cash flow positive after the -- in the second half of next year and beyond.

So that's the financial plan that we put together for 2022 and beyond, and that's the plan that we're executing against.

YUPELRI, as a brand is in fact cash flow positive today.

The financial dynamics of YUPELRI are quite attractive.

That's one of the reasons that future sales growth is critical to continuing to grow those cash flow streams to both Theravance and Mylan.

So if YUPELRI is cash flow positive today, then we look forward to YUPELRI with sales growth becoming more cash flow positive in the future.

Now relative to the third question, which is asset sales.

And I commented in my remarks that our approach is to partner both core and noncore assets as a way to manage the financial dynamics of the company.

Obviously we've got what we think are a terrific set of core assets in respiratory and then also exciting noncore assets that we've taken to a certain point in development and hold more promise.

And we'll be working to optimize each of those financially as we move forward.

So it may take the place of sale, may take the place in some instances of partnership to generate cash flow coming back into the company.

Andrew, do you want to -- yes, okay, Geoffrey, sorry, go ahead.

So just follow-up on that, though, in the case of TRELEGY, it's really a fairly passive royalty.

You don't have any direct role in the development or commercialization of that product.

So for example, over time, as TRELEGY's revenue grows, then the amount that is paid to the bondholders as a proportion of the total will presumably come down and the amount that comes back to Theravance will go up.

So have you thought about different strategic alternatives for about royalty, for example, since it's -- really your role is negligible other than just being a drop box.

Yes, that's quite well described our passive role.

And the answer to the question is, yes, we think about a host of different outcomes with TRELEGY.

We're obviously, as Rhonda highlighted and Andrew highlighted, we're thrilled with the performance of TRELEGY in the market, in particular, the launch of the 200 microgram dose that's associated -- the steroid that's associated with the treatment of asthma.

And we'll look to maximize TRELEGY's impact on the market value of Theravance Biopharma.

Andrew, any other comments?

Yes.

Nothing to -- nothing further to add, but then the concept -- the business development, corporate development activities that are at the heart of your question, Jeff, these take time to complete.

So obviously it's not prudent to give more specificity.

But other than to tell you and the street that we are actively working across that spectrum, both from a partnering process perspective for the noncore and core assets such as the JAK program, the pulmonary JAK program for asthma and COPD and pulmonary fibrosis as well as looking at the financial assets, which TRELEGY is effectively a financial asset, and you properly characterize the way that the royalties are paying off the debt for the 2035 nonrecourse notes.

And there's substantial cash flow that we believe that will come off of the future royalties that will accrue to Theravance Biopharma equity holders in due course.

Our next question comes from Marc Frahm with Cowen and Company.

Maybe just a follow-up on some of the YUPELRI market dynamics that you went through, and thanks for all that level of detail.

You pointed out the prescription volumes actually grew slightly in the quarter despite the headwinds the whole market is facing.

But revenue has actually declined a little bit.

Is there some sort of stocking impact that we should be thinking about that was driving that?

Or did you have to take some sort of discounting actions to kind of maintain place as some of your competitors face generic entrants?

No.

I think -- well, relative to the financial dynamics of the net sales recognition, Mylan or Viatris books the net sales.

We've seen fairly strong pricing, and in certain markets strong prescriptions.

Others that were more affected by COVID obviously, when -- I think this is the difference between the asthma and COPD markets, you've seen pulmonology visits drop and the COPD prescribing, particularly when it involves changing a device or changing therapy, pulmonologists like to see the patient in the office.

And the lack of patient visits has had an impact on those COPD prescriptions.

So we still see reason for optimism just based on individual territory success in regions where COVID has receded already.

But I'll let Rhonda sort of complement and add to anything any of my comments.

Rhonda?

Yes.

Thanks, Rick.

Thanks for the question.

And certainly building off of those external factors where we did see certainly some challenges in access, we still were able to obtain new formulary wins and grow the business, particularly in the hospital setting.

So what is absolutely key to not only where we did see success in the past quarter, but certainly going forward, is to ensure we are maximizing in-person HCP access, and the team is doing a great job already capitalizing on those opportunities and being mindful of the dynamics of where access is improving and where it's not, ensuring that we are executing on hybrid communication resources and tools and ensuring that, that reach and frequency is also complemented by increased investments in our digital and media assets.

Okay.

That's very helpful.

And then maybe on the Phase IV trial comparing to Spiriva, I don't know if you can provide some details on just kind of the sizing of that trial, time lines, but in terms of when we might be able to see data and label updates?

Rick, you want to take that?

Yes.

Sure, Marc.

Like Rhonda said, we're getting close to being able to kick that study off.

Probably the best thing to do is to think back to what we've reported previously on the first PIFR study.

We actually took the learnings from that and designed the second study here.

We can say at this point it's several hundred patients.

It will include revefenacin and tiotropium, as Rhonda mentioned.

Timing will start either December or January.

And then we do expect that that will probably take around a year to enroll.

Our next question comes from Liisa Bayko with Evercore ISI.

I think you just answered my question with your last response.

But I guess, maybe can you also characterize like how much bigger you think the market could be with a PIFR study under your belt?

Yes.

I think we've traditionally looked at patients with low peak inspiratory flow and estimates of patients with low peak inspiratory flow, representing 15% to 20% of COPD patients.

Today, patients who use nebulized therapy for maintenance represent about 9% to 10% of all COPD patients.

So I think we see a pretty significant increase in market opportunity.

Obviously, tiotropium is the market leader in single agent, long-acting muscarinic antagonist.

And I think this is one of the things that excites us is that revefenacin provides very solid FEV1.

You just have to look at our label to see those FEV1 improvements over placebo and the opportunity to really refine, as Rick said, the low PIFR population that responds the best to nebulized revefenacin.

It's a terrific opportunity to get the market growth.

Rhonda, anything to add there?

I might have lost Rhonda temporarily.

So Liisa, anything else?

There we go.

That's it for me.

I'm back.

I'm back.

So anything to add on market opportunity?

Sure.

I lost you a bit, but I can -- I think I can pick up on some additional commentary there.

If you think about this Phase IV study and how it can aid the COPD clinician to understand which patients could best benefit.

So thinking about those 1 in 5 patients who have low PIFR, so which could benefit most from nebulized therapy.

And then assuming a positive outcome of the study that provides us a new data opportunity, a new data communication and educational opportunity for which our team could thereby offer to exhibit an increasing competitive advantage and add value to our overall promotional efforts.

Our next question comes from Douglas Tsao with H.C. Wainwright.

Just, Rick, maybe it'd be helpful to understand as you sort of with the restructured company, how you're thinking about resources between the existing portfolio of molecules versus some of the work in terms of identifying new molecules, which is obviously if you think about the company's success over the years has been identifying our sort of lung-specific and organ-specific targeted therapy?

Yes.

That's a great question.

I think what -- most of our dollars, and as we look forward are in development.

I think we are going to capitalize on the research work that's done historically in a small commitment of ongoing research.

But I think one of the strengths of the company is that we do have a portfolio of compounds that are near the clinic that can be leveraged in development.

I'll kick it over to Rick Graham.

Yes.

Not much to add other than right now with this reorganization that we just announced 6 weeks ago, where we have a team of people that were retained that are laser-focused on continuing development of nezulcitinib in a streamlined way as well as continuing to work through the dry powder inhaled JAK inhibitor.

And remember, we're still in the process of closing down these late-stage studies.

We had hundreds of sites for izencitinib and ampreloxetine around the world.

So that's going to be our focus for the short term, Doug.

Our next question comes from Vikram Purohit with Morgan Stanley.

Great.

Going back to YUPELRI, I was wondering if duration of therapy is a metric that you track and have commented on.

And if so, I was wondering if you could give us any color on how that's trended since the product launched and through the past couple of months through the pandemic.

Yes.

I think the -- probably the only comments that we've made on duration of therapy overall is that we -- with this another aspect of the importance of the hospital as a point of treatment initiation is that we do see longer levels of persistence with patients who are switched to medicine in the hospital.

I would underscore something I think both Rhonda and I mentioned, which is we still consider ourselves relatively early in the launch of YUPELRI because of the impact of the pandemic hitting in really February, March period -- February 2020.

Rhonda, anything else?

It's certainly a metric we attempt to closely track.

However, I'll just comment.

It's quite difficult to assemble and recognize that those data lag from patient claims to be able to piece that together.

But to answer your question, specifically, have we seen a decline during the pandemic, we have not.

The duration has been reasonably stable to what we were seeing in early 2020.

Got it.

That's helpful.

And then a follow-up question on a separate topic.

On your agreement with Innoviva and TRC on the TRELEGY royalties.

Could you just update us on where any dispute with Innoviva currently stands?

And if there's been any updates on your discussions with Innoviva over the past couple of months?

Yes, there's -- I mean we received another $13-plus million out of TRC in early October.

I think we have totaled around $59 million we've received out of TRC in 2021.

That's the partnership that's managed by Innoviva.

We're not in the dispute currently within Innoviva.

We continue to work with Innoviva on TRC and work to protect our rights under the agreement and the arbitration rulings that have been held are -- as I've said before, the nature of the rulings create a degree of lumpiness in the cash flow coming out of TRC.

But at the end of the day, we receive 85% of the economics out of TRC and Aviva receives 15%, and that's unchanged.

Andrew, anything else to comment on that?

Well, nothing really further to add, although investors will notice that there are changes on our balance sheet for September 30, 2021, that do reflect the totality of the receivables that we are due, and we keep track of every penny of the 85% that Rick just mentioned.

Our next question comes from Brian Skorney with R.W. Baird.

This is Luke Herrmann on for Brian.

We were just wondering for nezulcitinib, could you talk about the market's clinical plan and time lines in acute lung injury and fibrotic disease?

And then secondly, was there any more color you could provide on the dry powder JAKS?

And any preclinical color that makes you optimistic?

Yes, I'll get started on it.

I think it's not only the preclinical work that makes us optimistic, but it's the clinical work that makes us optimistic.

I mean this is a JAK and inhibitor, if you're talking about the nebulized JAK, it penetrates into the lung.

It is a pan-JAK inhibitor, it does reduce inflammation in the lung.

And the -- affecting the JAK stat pathway obviously has been -- and reducing inhibiting that's been implicated in reduction in fibrosis in a number of different models, animal models.

So that's where we're encouraged.

I think we see 2 different segments.

One of them is the nebulized, clearly nebulized JAK inhibitor, which is nezulcitinib.

And the second is the dry powder inhaled JAK program, which does require a different chemical design to facilitate delivery through a dry powder inhaler.

We've seen anti-inflammatory effect with the lead there.

We thought the lead could -- which was 8236, it could be improved on.

And so I think we -- we think we're just really at the -- not so much at the very beginning, but early in the early stages of leveraging the JAK staff pathway to address hyper inflammation of the lung.

Rick, maybe you want to touch a little bit more on the chronic indications?

Sure, sure.

Just a little bit.

I think there are a lot of opportunities here, as Rick pointed out, for nezulcitinib.

And just stepping back for a minute, it's worth reminding everybody that we released results from a 200-patient Phase II study in COVID-19 with nezulcitinib back in June.

Our team subsequently engaged with global health authorities, and then we've been in discussions around various externally funded platform studies.

So there's been a lot of work going on with nezulcitinib.

We do think that that work in COVID is going to be applicable to future indications, both acute and potentially chronic indications.

So as Rick talked about, we're now focused on a streamlined R&D organization.

And with nezulcitinib as our most advanced asset, we're looking forward to providing updates in the near future.

With regard to chronic indications, we did talk about fibrotic disease.

And just keep in mind that fibrosis as a feature of most chronic inflammatory diseases can affect pretty much every tissue in the body, including the lung.

And when it's progressive, fibrosis can lead to organ malfunction and ultimately death.

And importantly, the JAK stat pathway is known to be involved in the development of fibrotic disorders.

So I likely expect lots of opportunities there, and we're taking a measured approach to figure this out.

Our next question comes from Joseph Stringer from Needham & Company.

Two from us on YUPELRI.

Just curious, given that you're co-promoting the drug in various settings, wondering if the -- your guidance, your 2022 guidance sort of reflects the -- or it gives you flexibility to sort of potentially increase investment there or increase capital in that direction to potentially continue to drive sales, whether it be expansion of sales force or something like that?

And then secondly, more on -- and sorry if I missed this earlier, but in the past you've given some metrics around HCP interactions and in-person interactions.

Just curious if those were up 3Q relative to 2Q?

Rhonda, you want to take the in-person interactions because you covered part of that, so.

Yes.

Looking at Q3 versus Q2, they were down slightly for in-person engagement, but overall engagement considering the team does still promote virtually on par there, but the in-person are what we see is the most important and greater impact.

Yes.

Relative to YUPELRI investing in their current plan, we have -- and I would say that our -- as Andrew highlighted, we'll provide more guidance in January with regard to the spending in 2022.

But under the current plan, we've got between Mylan and Viatris and Theravance Biopharma.

We've got increased investments in our plan for YUPELRI because we do think it's a significant opportunity for the partnership.

Our next question comes from Anupam Rama with JPMorgan.

Just a really quick one for me.

Can you remind us of the sales cutoff for the tiering of the royalties on the global sales of TRELEGY for that 5.5% to 8.5%?

Okay.

I don't have that.

We're in another tier right now.

I don't have that handy.

That is publicly available on the SEC website.

I don't know, Andrew, do you have…

At 7 -- the first tier is $750 million global net sales.

And then it goes upwards from there to the second tier, off the top of my head believe it's $1.25 billion and then $1.75 billion and then above, but we can double-check that.

I'm sure my -- I'm correct off the top of my head and loop back with the schedule that's pulled from the actual document.

Yes.

So here you go, on the -- up to $750 million in global sales the royalty rate is 6.5%.

From $750 million to $1.25 billion it's 8% up to -- from $1.25 billion to $2.25 billion it's 9%.

And above $2.25 billion it's 10%.

Now that is the growth royalty rate.

And then 85% is the implied royalty of that number -- those numbers are the implied royalty rate back to their Theravance Biopharma.

It appears we have no further questions on the phone.

I'd now like to turn the conference call back over to Mr. Winningham.

Please go ahead, sir.

Yes.

Thank you for joining us today for today's quarterly call.

We look forward to sharing the progress with you in the future of the new streamlined Theravance Biopharma.

Have a great day.

This concludes today's conference call.

We thank you for your participation.

You may now disconnect.